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Shake Up at the Top: Why SAP’s Bill McDermott is Vacating the Position on Time

SAP made a major announcement on Thursday, Oct. 10 that its long-time leader –- CEO Bill McDermott – was stepping down from his role. Taking the reins are new co-CEOs Jennifer Morgan and Christian Klein, who both have served on SAP’s Executive Board.

Sales and profits climbed surprisingly strongly after SAP had felt the effects of the trade dispute between the U.S. and China in the previous quarter. The Group increased its revenue by 13 percent year-on-year to €6.8 billion, leaving 30 percent more profit at the bottom line of €1.26 billion.

Source: CNBC - Interview with Bill McDermott

Why Bill McDermott is vacating his position on time

McDermott, who started his business career as a deli owner in Amityville, Long Island, joined SAP in 2002 as the head of SAP North America. He became co-CEO in 2008 and the company’s sole CEO in 2014, making him the first American to take on this role at the German enterprise giant. Under his guidance, SAP’s annual revenue and stock price continued to increase. He’ll remain with the company in an advisory role till the end of 2019.

Finish on a high note: After the initial shock of Bill McDermott's resignation as CEO had passed, quite a few people interpreted the surprising departure as only a logical consequence – he left when he was at his best.

In recent months, it has become increasingly apparent that the prosperous times he ushered in at SAP are starting to come to an end.

McDermott’s biggest bet came with the acquisition of Qualtrics for $8 billion. The gifted salesman simply wasn´t able to market it as a big success. Only a few can imagine anything concrete under the concept of the Experience Economy, with which McDermott justified the acquisition criticized as overpriced. Secondly, there is no overlap with SAP´s core and Qualtrics sells in a completely different category than SAP. Qualtrics may classify as one of the most wasteful acquisitions SAP ever made.

It’s also worth noting that the company saw several defections among its executive ranks in recent months, e.g. with both SAP SuccessFactors COO Brigette McInnis-Day and Robert Enslin, the president of its cloud business and a board member, leaving the company for Google Cloud.

Under Bill´s leadership, SAP also acquired corporate expense and travel management company Concur for $8.3 billion and SuccessFactors for $3.4 billion, but the big international organizations complain that they are still not seamlessly integrated into an end-to-end SAP System.

These acquisitions signal how much SAP is morphing into a cloud company, but customers are somewhat dissatisfied.

Now co-chief Christian Klein has to fix that

The laborious integration work must now be done by the new Co-CEO Christian Klein.

Christian Klein´s background is financial controlling. Since he took up the topic of pending integration, things have started to move. In addition, Klein pushed ahead with internal optimization at SAP in recent months, which resulted in a significant increase in the margin.

Klein’s successes have apparently caused Hasso Plattner, co-founder of SAP, to discuss succession planning with McDermott. The timing was right as in addition to the German organizer, Jennifer Morgan, an inspiring saleswoman would also move into the double leadership. And because McDermott makes quick and consistent decisions, the announcement of the brilliant figures for the third quarter was probably the ideal time to leave. At the height of his success.

Jennifer Morgan is the first woman to become CEO of a DAX company. Morgan was previously a member of the SAP Executive Board, responsible for the group's cloud business. She has been working for SAP for 15 years. The business economist quickly made a name for herself in the North American business after joining SAP in 2004. She was responsible for dealing with the authorities, including appearances before the U.S. government and Congress.

Source: CNBC – Introducing SAP´s new co-CEOs

It will be interesting to see whether this change in leadership has any impact on the push to migrate to S/4HANA by 2025 and how Klein and Morgan approach the ongoing challenge of improving customer trust. It’s certainly a company we’ll be keeping an eye on over the coming months but we’d love to hear your comments on the transition and whether this change might impact you.

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